In late February, NZX Regulation (NZXR) released its 2020 Oversight and Engagement Report summarising its monitoring and oversight activities in 2019 (the “NZXR report").1
The key takeaways are:
The NZX Surveillance team has increased its focus on screening and investigations following criticism, including by the Financial Markets Authority (FMA)2, that it was not doing an adequate job of monitoring NZX's markets. More recently, the FMA has acknowledged “the positive changes made by the Market Surveillance team".3 The NZXR report outlines that:
NZX has updated and refined its SMARTS Alerts system including to improve detection of specific forms of market manipulation (spoofing, pinging, phishing and bait and switch activities). The SMARTS Alerts system is a key tool used by the NZX and other institutions in detecting inappropriate market conduct. The alerts often provide the trigger for more extensive investigations or enforcement by the NZX, the FMA or other regulators. The alerts' parameters provide a useful indication of the NZX's key areas of focus.
NZXR's Surveillance team conducted 157 investigations in 2019, up from 133 in 2018.
In 2019, NZXR referred 15 matters to the FMA for further investigation, 13 concerning potential insider trading and two concerning potential market manipulation.
The implementation of the new NZX listing rules appears to have had a mixed effect on enforcement. On the one hand, issuers seem to be taking a risk-adverse approach to continuous disclosure, with the number of continuous disclosure inquiries and investigations down. On the other hand, issuers appear to be struggling with the more stringent requirements about disclosure of administrative information, with those types of issues on the rise.
NZXR's Issuer Compliance team conducted 202 enquiries and investigations in 2019 (up from 96 in 2018). Of these, 67% related to the release of administrative information and 17% related to continuous disclosure. NZXR notes that although the number of continuous disclosure investigations has decreased, the complexity has increased.
The high proportion of administrative information investigations follows the adoption of the new NZX Listing Rules in July 2019 and the more stringent requirements around disclosure into the Market Announcements Platform. NZX says it is taking a light-handed approach to enforcement of these matters as it works with issuers to transition to the new compliance obligations.
You can read the NZXR report
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